Geopolitics

COVERAGE AREA and macrothesis

The Great Recession ushered in a period of Western austerity and isolationism and, as it did, top-down multilateralism dating back to World War II gave way to bottom-up diplomacy and financial sanctions displaced military force projection. The resurgent globalism of the Iran nuclear deal and Paris Agreement on climate change now looks more like a “dead cat bounce” in a continuing trend towards Western institutional fragmentation in the wake of Brexit and the election of President Donald Trump. In 2017, U.S. diplomats remain internationally engaged, but not necessarily acting to resolve, producer nation challenges in Latin America, Africa and the Middle East. Despite President Trump’s most recent (and most moderate) Iran deal policy – strict enforcement rather than abrogation – we regard the bargain as increasingly unstable. Likewise, despite the President’s rhetorical thaw with the Kingdom, damage to the U.S.-Saudi relationship from President Obama’s disappearing “red lines” and Congressional passage of the Justice Against Sponsors of Terrorism Act appears largely unrepaired. If, as we expect, the U.S. remains enjoined to global climate compacts even as it slow-walks its domestic reductions, the E.U. could resume efforts to externalize its price on carbon, creating trans-Atlantic energy trade risks. Likewise, if North America Free Trade Agreement renegotiation marks a new protectionism (or rekindles the Obama Administration’s green trade war), retaliation could potentially jeopardize burgeoning crude and LNG exports.